Financial Security in Retirement: The Four Pillars

Featured on the Carnival of Personal Finance #46:

At the beginning of the semester in employee benefits law, I explain to the students that there are traditionally considered three major sources for funding one's retirement: personal savings, social security, and retirement funds.  We refer to this as the three-legged stool of retirement.

Well, the three-legged stool might be giving way to the four pillars (with apologies to Orly Lobel).

On Friday in U.S. News & World Report, there was an interesting article that suggested that we should think about the important elements of having a secure retirement based on the AARP's publication "Reimagining America: AARP's Blueprint for the Future." 

Although the social security category is the same, the AARP believes that personal or individual savings should be combined with retirement plan savings because of the increasing shift away from traditional defined benefits plans to defined contributions plans in which individuals direct their investments.

The two new categories include continued earnings from employment and health insurance. The continued earnings category is based on the fact that many workers are either not retiring or not retiring completely.  The health insurance category recognizes the large amount of funds that older individuals spend on health care and the more they have in place a comprehensive plan, the less likely they will need to drain money from other sources.

All very interesting, and I have to say that I for one am convinced that this may represent a better way to think about whether a person is going to have enough funds for retirement.

PS